How to choose our new geopolitical partners

In Douglas Dowell’s piece, Sentiments and statistics: why CANZUK won’t fly, he sets out the proportions of exports to CANZUK members relative to the total exports of each CANZUK member, showing that in all cases except New Zealand’s, CANZUK states are not amongst the top few export destinations for CANZUK exporters. He also considers the defence priorities of CANZUK states and shows that they are not currently aligned.

Since Douglas’ piece has garnered a bit of interest, it’s perhaps worth explaining where his argument goes wrong. A first, minor point is that he says re the UK “even if you doubled our trade with Canada, Australia and New Zealand, it’s never going to be anywhere near enough to make up for the hit to our European trade”; and re Canada “In Canada’s case, it’s quite obvious that nothing and no-one could match the scale of US trade”. But he’s mistaken in thinking the CANZUK partnership is intended to lead to the wholesale replacement of other trade with CANZUK trade.

A second point is that the fact one already trades with an economy is not a good argument that the main scope for extra trade is in that same place. In the case of the UK, for example, exports to the Single Market were around 55 per cent of total exports in the mid-2000s, are now down to a little over 40 per cent, and by 2030 will have fallen to around 33 per cent. Exports are growing faster to the rest of the world than to the market where they are already largest.

There is considerable scope for trade within CANZUK to grow. In the early 1970s, before the UK entered the EU, around 9.5 per cent of its exports were to the other CANZUK states and around 21 per cent was to the EEC6. The CANZ states grew 38 per cent more than the EEC6 did between 1970 and 2015, so one might have expected trade with CANZ to rise proportionately. Yet whilst the proportion of exports to the EEC6 grew to 28 per cent, to CANZ it fell to 3 per cent. One could certainly imagine intra-CANZUK trade quadrupling or more.

An additional minor trade-related point is that, just as the EEC added members over time, after an initial few decades with a core few to get itself established, CANZUK might do the same.

But let us move on to the more substantive errors in Douglas’ analysis. The most fundamental of these is the idea that countries choose their closest allies on the basis of whom they trade with most. For example, we can repeat Douglas’ exercise, but this time for China.

We can see here that the US and the EU are, by a long way, China’s most significant export partners. Does that mean that the US and EU are China’s closest allies? No. Because countries do not pick their closest partners on this basis.

Within the EU, the UK faced being dominated by the Eurozone. Canada faces domination by the US. Should China expand its influence in the Pacific region, Australia and New Zealand would face challenges there. The argument that a country must choose its geopolitical partners on the basis of whom it currently trades most with, even if that leads to domination, was one of the core arguments offered by the Remain campaign during the EU referendum – and it was rejected.

A further flaw in Douglas’ analysis is illustrated by his own graphs. His core argument is that a CANZUK partnership would be small beer and that all the CANZUK states should prioritise others. Intuition alone should have told him there was something wrong with that thought, given that the CANZUK states would be the world’s fourth largest economic zone. One quite obvious thing wrong with it is that the CANZUK states all trade significant volumes internationally. In 2015 their total trade was worth US$2.4 trillion. And as Douglas’ charts show, for all of them the US, EU and China are significant trade partners. They thus have a shared interest in the trade rules that will apply to all of them when they export to the US, EU and China. More generally, CANZUK will allow its members to collaborate in global fora.

Douglas’ thinking is dominated by an EU-type mindset, in which there is an implicit objective of internal self-sufficiency and internal prioritization – that the key question is how much we trade with each other, not how we all trade with the rest of the world.

Douglas adds some discussion of the defence priorities of CANZUK members. He shows that their current priorities are not aligned. Indeed they are not. That is why a new defence CANZUK agreement would be a change, not simply a continuation of the status quo. I think Douglas’ point is that he cannot see why CANZUK states would want to change their priorities. But that simply means he cannot see the merits of CANZUK states regarding each other as part of “us”, so that they would be interested in promoting each others’ interests as well as (perhaps even as much as) their own.

One reason for that might be the aspect of the core three CANZUK foundation blocks that Douglas did not touch upon: a migration agreement. The sense in which CANZUK citizens regard each others’ countries as much more alike than elsewhere in the world, and thus much more suitable as a place to settle, might naturally be mirrored in international cooperation over trade and defence. CANZUK citizens regard each others’ countries as (something close to) “us”. That is the most fundamental reason why a defence partnership makes sense.

Let’s back that up with some data. First, actual migration. UK citizens do move to the EU and US to live and work. There are around 1.2 million UK citizens living in the EU, and around 760,000 living in the US. But that is dwarfed by UK citizens moving to other CANZUK states. There are 1.3 million UK ex-pats in Australia, 670,000 in Canada and 310,000 in New Zealand. That is 2.3 million UK ex-pats elsewhere in CANZUK (about 45 per cent of all UK ex-pats), nearly twice as many as in the EU27 and three times as many as in the US — even though the population of the US is more than five times that of CANZ.  Of 600,000 New Zealanders living abroad, around 90 per cent live elsewhere in CANZUK. For Australia, the figure is about 22 per cent, with the UK as the single largest destination. The key exception here is Canada, where of 2.8 million ex-pats, 1.1 million are in the US, with the UK only third.

UK voters regard folk from Canada, Australia and New Zealand qualitatively differently from those from other countries. A 2011 survey by the research firm YouGov found that Australia, New Zealand and Canada are regarded as “especially favourable” by 48, 47 and 44 per cent of Britons. The next most-favoured country, the U.S., was way behind at 31 per cent, and the most-favoured EU member, the Netherlands, had only half the favourability of those three countries, at 24 per cent. An as we can see in YouGov’s 2015 survey, UK citizens favour free movement within CANZUK to a much greater extent than in the cases of the US or EU.

Thus, alongside (and deeply connected to) the similarities in culture, political systems, law and regulation, the most fundamental aspect of CANZUK is the sense of “us”. Douglas may think that there is no value in “us” – that all that counts are regional economic priorities and that it does not matter if the common CANZUK way of doing things is dominated or replaced by European, US or Chinese ways. But a central lesson of the UK’s experience in the EU – a lesson we can take and apply in Canada and Australia as well – is that for geopolitical partnerships to last, a common sense of “us” is vital. CANZUK has that. That is most basic reason why it will work.